[UPDATE] CVS Drops Bit Protest

A subsidiary of CVS Caremark on Friday dropped its protest of the state’s decision to award a major pharmacy-benefits management contract to rival Medco Health Solutions. CaremarkPCS Health filed a notice with the state Division of Administrative Hearings withdrawing the protest, but the document did not explain the company’s reasons. The Florida Department of Management Services this month said it would award a contract to Medco to administer pharmacy benefits in the preferred-provider organization part of the state employee health-insurance plan. Caremark has had the contract for the past decade, recently administering about $250 million a year in prescription-drug benefits. The protest argued that the contracting process was flawed for several reasons, including DMS’ consideration of how the contract award would affect job creation.

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THE CAPITAL, TALLAHASSEE, May 19, 2011 -

After a decade of managing pharmacy benefits for tens of thousands of state workers, a subsidiary of CVS Caremark has launched a legal fight to block the contract from going to another firm.

The Florida Department of Management Services this month said it planned to award the contract for managing more than $250 million a year in prescription-drug benefits to Medco Health Solutions.

CaremarkPCS Health filed a formal protest last week, and an administrative hearing is scheduled June 10. The company wants to receive the contract or to get the department to throw out the results of a contracting process and start again.

The protest lists a series of reasons that Caremark thinks the process was flawed, including DMS’ consideration of how the contract award would affect economic development. Medco guaranteed adding 400 jobs in Florida over two years.

“The (DMS) negotiation team’s approach benefited the other vendors to the detriment of Caremark … as Caremark’s longstanding and ongoing economic impact on Florida was essentially disregarded,’’ the protest said.

But in a memo recommending the contract award, the DMS team said Medco’s proposal “offers the best value to the state.’’

“Ultimately, this recommendation of award is a result of the highly competitive offer by Medco,’’ the memo said.

The contract deals with preferred-provider organization (PPO) coverage that the state offers to employees. Florida self-insures that part of the employee health program, meaning that it takes on the financial risks of providing coverage.

While it takes the risks, the state still needs to contract with private firms to run many of the day-to-day operations. In recent years, that has meant contracting with Caremark for pharmacy benefits and Blue Cross and Blue Shield of Florida to administer health coverage.

The pharmacy contractor is responsible for such things as providing mail-order drug services, a retail pharmacy network and claims processing, the DMS memo says. Documents filed in the protest, however, do not make clear how much money the winning contractor could expect to make on providing the services.

Recent estimates indicate prescription-drug expenses in the PPO program will hit $257 million this fiscal year and $279 million in the year starting July 1.

The pharmacy contract is expected to last from 2012 through 2014 and could be renewed for as many as three more years. It also could be expanded if lawmakers decide to self-insure HMO coverage that is another part of the employee insurance program --- an idea that was mulled this year.

DMS started the contracting process in September and initially drew responses from seven companies. That list was whittled down, and Caremark was ultimately the second-ranked company behind Medco.

A Tallahassee attorney for Medco did not respond to a phone message Wednesday. But the company formally intervened this week to fight Caremark’s attempt to scuttle the contract award.

“The agency (DMS) properly determined that Medco was the responsible and responsive vendor that will provide the best value to the state,’’ Medco wrote in a document filed Monday.

DMS spokesman Kristopher Purcell also said the contracting process was handled properly.

“I’m sure with any procurement there are minor little hiccups along the way, but nothing that would affect the outcome of the award (in this case),’’ Purcell said.

In its protest, however, Caremark used similar wording as Medco in contending it was a “responsive and responsible vendor entitled to award” of the contract.

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